patrick.net

Glen,

Much thanks for the description. A question then arises:

Since it is financially prudent to refinance in many cases, such as we did many years ago from our 30 year first at 8.25% to a 15 year 6.5% about 5 years later...

is it possible that a court might rule that "Purchase Money" status is assigned to the new loan/creditor? It seems a distortion of the law that essentially no long-term home owners will be protected unless they make a financially bad decision to refuse potentially advantageous refinance opportunities.

Secondarily, is it possible to do anything under current law to ensure/demand/require that you are still covered after a typical, vanilla refinancing?

As an aside, I do not fall in with the crowd that likes to assume that all refinancing, even serial refinancings are bad. The problem isn't the refinancing; it is the failure to reamortize. By simply getting a shorter mortgage equal or less than the original term, one is losing nothing but fees in a refi; and many refis are low/no fee during major rate movements. Even without a shorter contract term, it is still easy to engineer an amortization schedule yourself by just calculating a payment level and paying that instead of the coupon payment (assuming a simple interest, fixed, no penalty US-style mortgage). In fact, if one does this they essentially have created their own option mortgage without the risk of taking the kind lenders will give you.

Does it rally matter what the new index for affordability is? Nobody in thier right mind will live to be house poor. I believe we are just starting to see the effects of the repercussion cycles to come. My only curiousity is whether our goverment (Bennie Boy) will manipulate to appease the RE lobby. There has been tens of millions made in the last five years. The bulls don't want to leave the party. I think there will be lies and spinning in the coming weeks and months, Why? Because the housing industry smells blood in the streets.

Illegals go where they have to go but the PHD’s from India, China, Russia, … come to Silicon Valley. And they make tons of money. It’s econ 101, when demand exceeds supply, prices go up.

Oh really, that's probably because Intel pays the H1-B's so much, right?

Sorry fucktard, but that is not how it is in reality. They come here because it is better getting paid 50K a year at Intel than living in a puss filled canker, aka, you.

I see you have time on a Saturday to write more fucking dribble, what's up? Spend your weekly allowance too soon? That's ok, I'm have a BBQ to night you can email me at bowchickywowwow@yahoo.com, throw away account, I'll give you my address, stop by if you like. I would love to discuss the finer points of your very well thought out original argument in person. Feel free to bring whatever friends Mommy and Daddy have bought you.

HARM kindly delete fucktard

Do you guys even understand the concept of supply and demand? Stock market crashed because there was no “demand”.

Do they teach any economics at UCSB? Apparently not.

Randy's Supply & Demand for Trolls, 050:

There had to be demand for prices to fall. If there was no "demand", then sellers would find their orders going unfilled.

Kind of like the housing market today.

There is plenty of demand. No one disputes that. It's just that the demanders are demanding lower prices.

...Just like happened to the stock market.

Hey UCSB troll let me know if you're going to make it so I know how much cock to have on hand for you to suck.

Randy H, newtroll same as the old troll has a perfectly good argument,

1) Housing only goes up,
2) Housing is continuing to go up,
3) Rich immigrants,
4) Strong fundamentals.

I see nothing incorrect here, do you? I mean just because even the mainstream media is now reporting YOY - values for most if not all "markets", does a little thing like realty really matter when all you do is cash Mommy and Daddies checks and maybe supplement your income with a little cock gobbling?

Hey fucktard, you forgot to say "rents are thru the roof"

Just curious, when you're at the frat house sucking cock do you ever say out loud, "wow, I'm at a frat house sucking cock". Whoops, sorry, I forgot, not polite to talk with ones mouth full.

Your work here is greatly appreciated; please continue to amaze us with your brilliant insights. You're sure to go far in this world; your formula of keen intellect coupled with a ready desire to suck cock is truly the key to success. Good that you stumbled on it so soon in life, as it surely will save you from becoming a JBR.

Or you could just go the fuck back to Craigslist.

Dude, seriously don't worry about the cock sucking thing, the way i see it, worked perfectly good for your mom, should be ok for you too. Just a family tradition for you. With your firm grip of finacial fundamentals, seems that bankruptcy is also.

Hey but pat yourself on the back, we can't all be cock sucking bankrupt trolls.

Randy said:

Since it is financially prudent to refinance in many cases, such as we did many years ago from our 30 year first at 8.25% to a 15 year 6.5% about 5 years later…

is it possible that a court might rule that “Purchase Money” status is assigned to the new loan/creditor? It seems a distortion of the law that essentially no long-term home owners will be protected unless they make a financially bad decision to refuse potentially advantageous refinance opportunities.

Randy,

I suppose anything is possible when it comes to the courts. Usually when there are major economic disruptions, courts and legislatures respond by changing the rules of the game to respond to political pressure. If the alternative is a crushing wave of litigation and bankruptcies, the powers that be may be inclined to respond by changing the rules. But I don't think that's how it works under current law. So my understanding is that it would probably take either an act of the CA legislature or a decision of the CA Supreme Court to change the status quo. And the lenders would undoubtedly scream bloody murder if it happened.

I'm not sure, but I would also guess that this could even have repercussions in the MBS market. Georgia recently tried to pass a consumer friendly law which would have made it easier for consumers to get out of certain abusive subprime mortgages. Some major lenders announced they would get out the Georgia market because they would not be able to resell these mortgages in the secondary market. Then Congress overrode the Georgia legislature and pre-empted the Georgia statute via a special act of Congress. I think something similar could happen if the CA Supreme Court or legislature tried to change the rules after the mortgages had been sold. To suddenly make thousands of mortgages non-recourse would obviously impact the value of those mortgages, which could trickle down to pension plans and other investors.

However, I think we can safely anticipate that the next wave of foreclosures will put a lot of borrowers into this exact situation. The courts and legislature will have to decide whether they would rather stick it to the borrowers or the lenders. A typical homeowner who bought before 2004 and who refi'd to reduce their payments or the duration of their mortgage probably won't get too badly screwed unless the downturn is very severe and they are forced to sell into a dead market. But the serial flippers who cashed out all their equity to buy condos in AZ may find the courts and legislature less willing to allow them to skate away from the consequences of their imprudence. Major moral hazard if they were to do so, IMO.

Secondarily, is it possible to do anything under current law to ensure/demand/require that you are still covered after a typical, vanilla refinancing?

Well, I suppose some lenders (especially smaller, independent operators) may be willing to modify the boilerplate to make the loan non-recourse. Especially if the LTV is fairly conservative (eg: 70 or 80%). But this is purely a guess on my part. I have never heard of anyone negotiating anything like this. But, as I said, I have not been involved in very many real estate deals. I suppose it might raise some eyebrows with the lender, since the lenders presume that you have no intention of walking away--even if the market crashes and you find yourself underwater on your mortgage.

Leading Indicators Forecast Housing Crash

A key gauge of future economic activity fell unexpectedly for the fourth time this year amid signs of a slowing housing market, according to a report released by a private research group Thursday.

The so-called U.S. index of Leading Indicators declined 0.1 percent in July to 138.1 after inching up 0.1 percent a month earlier, according to the New York-based Conference Board. Wall Street economists in a Reuters survey were expecting the index to advance by a modest 0.1 percent.

"The economy is cooling but it isn't likely to stall out," said the firm's labor economist Ken Goldstein. "The cooling off in the housing market has been more pronounced, however, and is one factor in the softer domestic pace of economic activity.

"Meanwhile, the coincident index - a measure of current economic activity -rose 0.2 percent last month, building on a 0.2 percent gain a month earlier. So far this year, this index has logged monthly gains.

The leading index measures a basket of economic indicators ranging from unemployment benefit claims to building permits and is intended to forecast economic trends up to six months ahead.

According to the Conference Board, half of the ten indicators that make up the leading index increased in July, but it was mainly a decline in building permits and a steady number of weekly claims for jobless benefits that drove down the index.

SQT,

I closed that thread and deleted his messages. One way to handle limiting Trolls is to edit your original post after it's gone quiet and unclick the "Allow Comments" box.

A good indicator is to wait until after weekend readers have had their chance to comment. Often DS and Bap33 will be some of the last to comment ;)

Glen,

Your commentary on deficiency judgments is interesting. While CA law allows deficiency judgments in certain circumstances, I expect that the terms of the loan contract must provide for a deficiency judgment in order for the lender to pursue such recourse. Most states do allow for deficiency judgments, and my loans on properties outside CA have all included a provision explicitly stating that the lender has this right. None of the loans on my CA properties have ever had any such reference. Therefore I assume that the lender has no such right under the contract terms of these loans. This is an academic point for me, as my LTVs are mostly under 25% of value now. However, I wonder if lenders are placing the needed contractual wording in their loan documents to allow them to seek a deficiency judgment, and whether it is even worth the bother for them (prolonged process of foreclosure if a deficiency is enabled). It seems that for most borrowers there are no other assets of consequence to pursue – so the legal right to seek a deficiency judgment would be a moot point, and the lenders would be better served to just take the write-off and move on.

What do you see? Is this evolving?

This week's Barron's has an article titled "The No-Money-Down Disaster" that pretty much parallels what people have been predicting on this blog for years.

I cannot find an online copy, not being a subscriber, or I would excerpt portions. If anyone has a subscription, they should review it here. I think you would all be pleased.

It is in the "Other Voices" section, so doesn't count as an endorsement by a major financial publisher, but the fear is there, or they wouldn't run it.

Barron's website is down for now, I will post some excerpts when it is back up.

New thread: I may buy a condo, finally

If, like Japan, we fail to act, the coming decade could be very bleak indeed.

Prop 1300: Save Homeownership Act
To sustain the American Dream and save the children, the State of California will guarantee that those who buy homes will be able to sell them at a minimum of the original purchase price. Funding for this act will come from converting most public schools to fireworks factories, and to charge all new residents to this state a naturalization fee of 25% of their net worth.

When I was a teenager, I thought tire spikes on all the roads crossing the state line might help slow the population influx. The Population of CA has almost doubled since then.

It would really be a shame to close out this thread with fewer than

100 posts.